From Phil Davis at NonDealingDesk.com about Forexscholar and his possible motives.....
"It appears Chris's suspicion regarding Forexscholar's original posting declaring all but a small handfull of well capitalized market makers are destined to
close their doors may be more than a suspicion. I spent a hour or so this morning doing a little research and discovered the Forexscholar lives just 5.4 miles from FXCM's downtown Manhattan offices.
Considering the distribution of the world's population, I'm hard pressed to think that this is just a mere coincidence. If, in fact, Forexscholar does work for FXCM it shows how low the company will stoop to exclude real competition in the marketplace. As Chris points out, the fact that Forexscholar put MBTrading/EFX name in the title of each of the forum postings only shows that ECN (non-dealing desk) trading is a real threat to the market maker business model.
Regarding capitalization requirements, anyone who knows anything about business knows that no properly managed company deposits phenomenally more than it has to deposit in an account that generates a nominal rate of return unless it has a good reason to do so. I would suggest that the well capitalized FCMs cited in Forexscholar's original post show those high balances for one reason and one reason only - it makes the look stronger than the little guy.
In FXCM's case, (IMHO) the only reason they show the biggest account is that they're using that to persuade traders that they're the best capitalized FCM in the business. Well, they ought to be. They've been screwing clients worldwide since 2001 and now want to change the rules of the game - not to protect the trader mind you but to insulate themselves from legitimate competition.
Any good financial planner will tell you that a balanced investment portfolio will include CDs and other time deposits but not to the exclusion of other asset classes. My guess is that the $50M they show is chump change considering the revenues they generate pulling off 2 pips per trade on the 90,000 traders they have in their camp. In 2005 they reported
$154M. If that figure is accurate it's not a stretch to think that they currently have at least $200M in their political war chest considering the fact that they were willing to pay upwards of $110M to buy the now defunct Refco client list.
There's certainly no concern on my part that FXCM is going to go under unless, of course, the NFA decides to shut them down for some other reason. I'm not concerned about MBTrading/EFX either. They are but one of a small number of FCMs offering an alternative to the traditional bucket shop and push comes to shove, if they need to meet a higher cap requirement, I'm confident they'll find a way to make that happen. Their business model is not only an ethical one, it's a viable one that's obviously scaring the beJesus out of FXCM. Otherwise, FXCM wouldn't be encouraging its minions to create a fear campaign to drive MBTrading/EFX and others out of the business.
Again, it's hard for me to believe that Forexscholoar isn't in the employ of FXCM so members might want to take what he/she had to say with a big block of salt."
Phil Davis -
The NDD Forum - Savvy Traders Want to Know - View Single Post - EFX/MB Trading Going Under?